Rose Wanjiru and Anne Wanyagathi present on the relationship between three county governments and the national government in the collection and administration of property taxes in Kenya.

1. Examining the collaboration between County Governments and
the National Government in Collection and Administration of
Local Property Taxes in Kenya:
A Case Study of Kiambu, Machakos and Laikipia Counties.
Rose Wanjiru & Anne Wanyagathi
Presented during the First APTI Annual Conference
12th June 2018
Dakar, Senegal

2. Content
1. Introduction
2. Study Objectives
3. Research questions
4. Related Literature
5. Methodology
6. Main findings
7. Conclusion and recommendations
2

3. 1. Introduction
 Kenya made major change in its structure of governance from a
centralized to devolved government, following the promulgation of
the Constitution of Kenya 2010.
 Most of the 47 County Governments rely on the equitable share
transfer from National government to finance their devolved
functions.
 2014/15 fiscal data: equitable share transfer to County Governments
constituted about 89% of County budget resources.
 Property taxes constitute the dominant revenue stream for most
urban (urbanized) counties.
 Counties face challenges in relation to the property tax
administration.
 Most County Governments generally lack proper tax collection
systems, infrastructure, administrative and technical capacity for
collecting own source revenues.
3

4. 2. Study Objectives
Main objective:
Examine potential collaborations between National and County
Governments in property tax administration.
Specific objectives:
1. Examine the county property tax collection systems, infrastructure,
administrative and technical capacity.
2. Examine the linkage between National and County Governments in
property tax administration.
3. Identify challenges and potential areas of conflict that exist between
National and County Governments in property tax administration.
4. Examine collaborative potential that exists between national and County
Governments in administration of property taxes.
5. Draw policy recommendations in order to ensure efficiency and
effectiveness of property tax administration.
4

5. 3. Research Questions
1. What county property tax collection system, infrastructure,
administration and technical capacity are in place; the existing
weaknesses and challenges and the changes that County
Governments have put in place since 2013.
2. What is the roles of; and the linkages between the national and
County Governments in property tax administration?
3. What challenges and potential areas of conflict exist between
National and County Governments in property tax administration?
4. What collaborative potential exists between national and County
Governments in administration of property taxes?
5. What policy measures can the national and county government put
in place in order to ensure efficiency and optimize effectiveness of
property tax administration in the Country?
5

6. Machakos County6

7. Laikipia County7

8. Kiambu County8
 New commercial and residential buildings coming up.
Previously rural and largely agricultural

9. 4. Related Literature
 The principles of a good tax should guide tax policy formulation.
 The theories of: the ability to pay principle and principle or the
benefit principle were also useful framework for analysis.
 Administration of local taxes increases autonomy of the local
governments
 Design and administration of property taxes and rates are crucial
for successful decentralization in any country.
 Collaborations and partnership between all levels of governance
can enhance revenue collection and public service delivery to the
people; interesting case of collaboration – Rwanda, Ethiopia,
Indonesia.
 Public choice theory posits that individuals should have a social
contract that creates a state that provides their preferred public
goods and services (Buchanan 1975)
9

10. 4. Related Literature…/2
 Property taxes remain very significant as the major sources of local
revenue in most countries (40% of sub-national revenue in
developing countries; 35% in OECD countries; and 12% in transition
countries during the 1990s - Bird and Slack, 2004).
 Property taxes from all counties were 0.7 percent of the Kenya’s total
revenue collections for the FY2015/16 (KNBS, 2016).
 Property tax administered at the county level but they face many
challenges in administration.
 Counties can appoint a revenue collector to collect revenue on their
behalf.
 Laikipia and Kiambu counties have appointed the national revenue
collector (KRA), but this is yet to be implement.
10

11. 5. Methodology
 The study adopted qualitative and descriptive tools of analysis with the aim
of elaborating the institutional and policy frameworks, practices and issues
with regards to property taxation at the county levels.
 A systematic analysis framework based on the key parameters; theoretical
framework and principles of good taxation.
 Both primary and secondary data was used.
 Primary data was collected from elite interviews of officials from the
Counties and National Government and their agencies; and from property
taxpayers using structured questionnaires and key informant interview
guide tools. Forty (40) were interviewed.
 Tax payer data was collected from about 203 respondents who were
randomly sampled from the three counties of Kiambu (84), Machakos (57)
and Laikipia (62).
 Secondary data was gathered from County budget documents revenue
and expenditure reports, Spatial Plans among others.
11

12. 6. Findings
 Survey was conducted in three counties: Laikipia, Kiambu and
Machakos.
 Land rent is payable to the national government on all
leasehold land.
 Property taxes are administered independently by County
government i.e. land rates, plot rent and ground rent.
 Collections are made by the revenue department. Laikipia
County has a revenue board
 Independence of revenue collection? (budgets, staffing)
 Relevant laws: Rating and Valuation Act, the Finance Act and
the Valuation rolls - not all counties have them in place.
12

13. 6. Findings…/2
 The Counties use old valuation rolls (Nanyuki ‘98, Nyahururu ‘06;
Machakos ‘07, Kiambu ’82… in accordance to defunct town and
municipal council rolls)
 Counties apply an area rate, zone rate or unimproved site value
 Valuation rolls are over 10 years.
 Kiambu initiated a process to update the valuation roll but this roll
has to be approved by the county assembly, then made open for
public scrutiny before it’s fully rolled out. This might take a full year
(upto 2019)
 It captures 140,000 properties; using unimproved site value. It’s about
40% coverage.
 Formerly freehold properties have become rateable (Mavoko,
Kiambu)
13

14. 6. Findings…/3
 Property tax databases (registers/cadastres) are incomplete
(not all rateable areas are covered, details of owners not
updated)
 Billing is a challenge (owners details not updated/owners not
available)
 There is voluntary registration of taxpayers. Some of the
property owners who qualify for payments of rates and rent
are not registered.
 Counties do not accept cash payments.
 Collect Bill from rating clerk  payment at cashier using
MPESA/bank agent present receipt to rating clerk
clearance certificate (Laikipia and Machakos)
 Kiambu has bank agents in payment halls; system is integrated
(automated) both front & back end (reports produced in real
time)…currently undergoing change?
14

15. 6. Findings…/4
 Kiambu is the only county that is automated (structured &
unstructured flows).
 Laikipia and Machakos counties have largely a manual system
in place.
 There are gaps in record keeping and accounting (even
consolidation at national is now incomplete)
 There is poor enforcement. Done by Public (county)
Administration and sometimes in conflict with the revenue
department.
 Linking SBP to rate payment (Machakos)
 Linking county services e.g. approval of building plans, change
of use, etc to rate paying
 Political interference (waivers, electioneering period)
 Tax amnesties increase revenue collection but it is not
sustainable
15

16. 6. Findings…/516
Land use Frequency Valid Percent
Agriculture 36 18.7
Residential 65 33.7
Commercial 92 47.6
Total 193 100.0

17. 6. Findings…/6
County analysis of revenue collected by stream in FY
2015/16
17
9%
23%
18%
11%
17%
13%
0% 5% 10% 15% 20% 25%
% Property tax/Local revenue
% Local revenue/Total County revenue
Machakos Laikipia Kiambu

18. 6. Findings…/7
NB: 2015/16, amnesty led to increased rate payments
18
Revenue stream 2013-14 2014-15 2015-16 2016-17
Land rates & debt
clearance cert 177,836,331 183,794,860 176,939,043 159,763,871
Plot/stall rent 64,943,692 19,680,684 17,366,173 -
Total local revenue 1,382,340,556 1,356,589,889 1,121,680,950 1,259,304,94
% of Land rents to Local
revenue 13% 14% 17% 13%
Machakos County revenue records

19. 6. Findings…/8
Revenue Stream 2015-16 2016-17 2017-18
Land Rates Management Unit Amount Amount Amount
Property Rate Charges 233,162,209.00 235,425,609.00 129,346,350.00
Percentage 9.45 11.23 10.91
Total: 2,468,294,735.18 2,097,014,124.41 1,185,851,690.40
19
Kiambu County revenue records

20. Findings…/9
Principles of taxation from taxpayer responses
20
21
14
48
32
20
22
39
72
52
44
76
27
17
19
30
24
41
21
13
27
19
12
26
31
14
14
26
18
21
5
11
10
3
24
35
18
22
29
17
17
9
8
25
9
0 20 40 60 80 100 120
Efficiency
Simplicity
Transparency
Equity
Convenience
Adequacy
Predictability
Accountability of county government
The benefit principle in setting charges and…
The ability-to-payprinciple –vertical equity
The ability-to-payprinciple –horizontal…
Not effective Somewhat effective Very effective Effective

21. 6. Findings…/10
Principles of taxation from taxpayer responses
21
4
1
1
64
28
76
96
99
99
36
72
24
0 20 40 60 80 100 120
Are youawareofthe memorandum ofunderstanding(MOU) signed
betweenthe CountyandKenya Revenue Authority(KRA) onrevenue…
Doyouknow the contentofthe MOU?
Was the public involvedinthe process the contentsofthe MOU
agreement countygovernment andKRA?
DoyouthinkinvolvementofKRAintaxcollectionwillimprove public
service deliverybythe county?
Does the MOUsupportdevelopment of the county?
Doyouthinktheinvolvement of KRA inrevenue collectionwould
improvetheamountofpropertytax collectedby countygovernment?
Yes No

22. 6. Findings…/11
County Challenges in property tax administration Recommendation
Laikipia Use of fake receipts to collect revenue;
unwillingness by people to pay levies; Political
interference/patronage; some people refuse to
pay because they are relatives of key people in
the County Government.
Automation, update of valuation
role.
Kiambu revenue leakages and engaging of casual
revenue collectors and external interference.
Most property owners in some regions, like
Juja, have not been issued with title hence they
don’t pay
Reforms include: step up efforts on
tax administration and mobilization
of revenues; Enhance revenue
supervision; automate collection.
Machakos Delay in automation of revenue collection;
Inadequate and ineffective enforcement
officers; lack of vehicles for supervision; Lack of
clear departmental mandates hence
overlapping of the revenue function across the
various departments; Resistance from the
business community caused by lack of
awareness; Revenue Cartels.
Automation; Additional directorate
of revenue collection is already in
place which is charged with revenue
administration and management
hence enhanced efficiency and
effectiveness in revenue collection.
22

23. 6. Findings…/12
 Poor linkages between the counties and national government
on land matters generally and property taxation in particular
 Ministries, Departments and Agencies (MDAs) should play
various key roles in supporting and backstopping counties
 Key MDAs included: National Treasury (NT), Kenya Revenue
Authority (KRA), Ministry of Lands (MoL), National Commission
on Land (NLC), Commission on Revenue Allocation (CRA),
Office of the Controller of Budget (OCoB), Ministry of ICT,
Ministry of Devolution and Planning, among others.
23

24. 6. Findings…/13
Linkage between counties and national MDAs could be on the
following
 Policy and legislative frameworks – NT (revenue policy), MoL
(Rating and Valuation Acts)
 Tax administration capacity – KRA (systems, knowledge
sharing, payers details e.g. PIN, )
 Automation – MoICT, NT (IFMIS???), ICT Board
 Information exchange and database management
(cadasters) – MOL, NLC,
 Integrated financial system with revenue module (reporting
& accountability) - NT
 Technical support and capacity building – MoDP
(surveyers, planners, etc), MoL, KRA, CRA.
24

25. 7. Conclusion and
Recommendations
The MDAs that should spearhead the linkages –
 Ministry of Lands, the National Land Commission and the
Ministry of Devolution and Planning would facilitate in
providing the requisite technical support on the land
matters;
 National Treasury and Kenya Revenue Authority would
facilitate in the policy and legislative frameworks; and tax
administration respectively
25

26. 7. Conclusion and
Recommendations (Anecdote)
 The urgency for the quick engagement of the national agencies with
the counties with regards to matters of land has further been
brought to the fore by the recently reported unprecedented move
where the Governor Chepkwony of Kericho County signed an
executive order directing that all land survey work be carried out by
the county government.
 He did this on the basis that the Kericho County Assembly had in
2015 approved the Kericho County Survey and Mapping Act. The
governor ordered that all survey and mapping resources, including
resource maps and equipment, be immediately handed over to the
relevant department of the County Government of Kericho
26